Rolex Availability: Why this is the new normal

[inadeje]

While perusing this article and considering other geopolitical scenarios surrounding world GDP analysis, I have come to the conclusion that this new normal is here to stay. Quite a lofty prediction, but I will try to outline my beliefs.

Let us first base our assumptions on a Rolex S.A. (Excluding subsidiary Montres Tudor SA) producing 1 million watches annually, basically returning from the 810,000 produced in 2020 to the medían annual 1m production number averaged over the previous 5 or so years. Secondly, let us continue to assume that Rolex controlled its customary approx. 25% of the swiss watch market until Jan 1st 2021. The swiss watch market is considered to be approximately 4m watches annually. General market sentiment, whose barometer can be derived from forums like this one, indicates that Rolex desirability has increased significantly in at least the previous 12 months. But by how much in percentage terms?

A simple calculation based upon this data results in every 1% of the swiss watch market representing approx. 40k watches. So, if Rolex has taken just 3% extra market share, rising from 25% to 28% it would need to produce 120k more watches to satisfy the demand. One solution would be to increase prices across the board by 10% (wait…they just did that) while maintaining the current production volumes, thus squeezing other manufacturers margins unless they follow suit. Many have… So the conundrum continues without a solution to the supply issues. Could Rolex manufacture 120k more watches to capture the hypothetical additional 3% from other manufacturers? So a 12% increase above historical annual production?

But, what if the swiss watch market as a whole isn’t 4 million watches anymore? What if new demand due to geopolitical factors (China, India, etc) requires hypothetically 5m watches? Logically other manufacturers could pick up the slack and would be seemingly more than happy to fill the void? The problem with this analysis is that the swiss watch buyer is fickle. It is largely a niche market and buyers tend to have their sights set on a brand (or two) and won’t budge from their decision. They’ll either wait, or pay over the odds (enter the greys?). So the secondary grey market is possibly satisfying two phenomenon that have occurred concurrently. 1. Higher swiss watch demand overall 2. Selective buyers who will only settle for a given brand.

This is where the Rolex meteoric rise to fame must be factored in. As I’ve stated in other threads, Rolex has crossed over into the ultra-desirability realm, a status that the company hasn’t ever held with such conviction since it was founded. The subtle blend of increased swiss watch demand, huge brand recognition and sustained 1m annual production means that only one parameter remains as a variable - PRICE. But Rolex just increased prices by 10%, and we all know that this increase isn’t anywhere near enough to dissuade buyers, especially in a market where Rolex watches are regularly selling at 2, 3 and 4 times retail.

So what gives? Well, I would say nothing gives. I would say that this is the new normal and save for a huge worldwide economic meltdown similar to that experienced in 2008 the situation is unlikely to improve, alas, it will probably get worse before it gets better (if in fact it ever does). What does worse mean though? Well, it means that swiss watches on a whole will remain extremely desirable, with Rolex continuing to lead the charge. If all things remain the same, the lack of supply will be rectified via continued increases in secondary market value of all Rolex models, including long discontinued pieces that were previously off the desirability radar. Supply won’t and cannot meet demand, even if Rolex has gained just another 3% of the whole swiss watch market, that’s 120k extra watches they are unlikely to produce. 3% of the swiss market is 12% of the Rolex production, they’ve already raised prices by 10% this year, so…factoring in everything, I’d say we’re looking at an increase in grey prices of at least 25% this year, and possibly up to 40% on ultra desirable pieces.

2022 and beyond is likely to render getting a Rolex at retail an aberration or an almost mythical accomplishment.

[CarlOver]

Nice. Good read.

[JC316]

You mean like, forever?

= )

Life life without regret and in good health!

[dpt.calvin]

What’s the TLDR version?

[GradyPhilpott]

I would like to point out that Rolex has not had a price increase since July of 2012, except for some currency corrections in some markets.

I think it would be hard to put the recent price increase on some machinations to manipulate the market.

You're way above my intellect with regard to your overall post, but I thought I would just throw that out there.

[ArtNouveau]

Originally Posted by GradyPhilpott

I would like to point out that Rolex has not had a price increase since July of 2012, except for some currency corrections in some markets.

I think it would be hard to put the recent price increase on some machinations to manipulate the market.

You're way above my intellect with regard to your overall post, but I thought I would just throw that out there.

Actually RolexUSA has had price increases on January first two years in a row now. You are correct there was a long lull in our market. Other world markets have had more frequent increases, the goal being to keep MSRP basically the same everywhere.

[TheNguyener601]

Rolex priced increase starting to reflect in the secondary market. The Batman is just climbing and climbing


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[teck21]

The mass market has only woken up recently to how cheap Rolex watches are relative to their perceived desirability and exclusivity.

This desirability and exclusivity is certainly not going away any time soon.

In fact, it’s getting enhanced with each individual who cannot get a Rolex watch at msrp.

Only a Rolex will do.

And only Rolex can ruin it for themselves.

Nothing else comes close.


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[IamJacky]

Very well written and I agree with pretty much everything you proposed. Thank you for your contribution!

[waterking]

Well written OP. What we are seeing is the new normal.

[dialguy48]

Here is another variable to add to the mix, over the last 10 years our little planet has added an extra billion people whereas Rolex's production has roughly stayed the same. I am not saying 10 year old's are buying Rolex's but you get the point.

I would also venture to guess a good portion of Rolex's being sold are being sold to consumers who already own a Rolex or multiple Rolex's, meaning the supply distribution is skewed. I think Rolex could easily manufacturer 5x - 10x the amount of watches they already manufacturer and still have waitlists on sports models.

[teck21]

Originally Posted by dialguy48

Here is another variable to add to the mix, over the last 10 years our little planet has added an extra billion people whereas Rolex's production has roughly stayed the same. I am not saying 10 year old's are buying Rolex's but you get the point.

I would also venture to guess a good portion of Rolex's being sold are being sold to consumers who already own a Rolex or multiple Rolex's, meaning the supply distribution is skewed. I think Rolex could easily manufacturer 5x - 10x the amount of watches they already manufacturer and still have waitlists on sports models.

Just to add on to that, the number of people who

a) want to own one Rolex
b) own one but want to own two or three
c) want to own them all
d) women who never cared about Rolex’s but now wish to own one exist in large numbers

Have absolutely exploded.

And they can all afford it.

If Rolex hasn’t increased production substantially….


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[GradyPhilpott]

Originally Posted by ArtNouveau

Actually RolexUSA has had price increases on January first two years in a row now. You are correct there was a long lull in our market. Other world markets have had more frequent increases, the goal being to keep MSRP basically the same everywhere.

Thanks for the information.

[vh2k]

Rolex is 25% of market VALUE — not units.

The Swiss watch industry easily produces over 10 million units per year.

[Andad]

Yes, a few interesting calculations.

Switzerland produced just over 14 million watches in 2020?

2019 was even higher.

Average price of exported Swiss watches

Wristwatch exports in 2019 for the five main exporting countries

Value (USD bn)Units (millions)Average price (USD)
Switzerland
21.8
20.6
998.0
Hong Kong
8.2
197.8
29.0
China
4.9
644.3
4.0
France
3.0
5.9
405.0
Germany
1.8
16.9
90.0
Chart: ptur Source: Federation of the Swiss Watch Industry Get the data

[TimepieceRPP]

well written. thanks. have to accept the norm that it is not easy to get any Rolex in foreseeable future or to go grey

[HMHM]

Ultimately, Rolex is considered by many to be the best Swiss watch. Most layman on the street don’t know about AP/PP/VC etc. Many people who are getting into watches these days only want Rolex, and long term collectors themselves still want Rolex. When demand is greater than supply, we arrive at the state we have today.

[4rnold]

To the op, i think you are absolutely right.

My ad confirms this also. The supply is the same as it was 2, 3 or 4 years ago.
But the demand has exploded.

So, while we saw few people complain about waiting lists. Those number has exploded. Wich makes the brand even more desirable

[pmoz]

Do anyone know how much insider buying is happening? I mean nothing illegal obviously, but if the employees at ADs are allowed to procure watches (obviously not for reselling), they could easily find a couple each year in their network that they could help obtain a watch. This would mean that the very people close to employees at ADs (friends family etc.) would be able to obtain a watch - meaning that thousands of watches will go only to this close network who is at the top of the "wishing lists".

At least to my knowledge, the wait time for e.g. a Rolex GMT Master II BLRO is in the range of 6 months - if you were to be at the very top of the list at an AD.

Edit: I also think the main issue in the current market situation is the reselling part - there are literally tens of thousands of Rolex watches for sale at grey dealers and shady private individuals who somehow have 5-6 mint Rolex ranging from GMT Master II to solid gold Daytonas. I feel that there is a ton of money laundering through some of these trades at least the ones with private individuals - and to be honest probably also within the grey dealers who can buy watches from 'friends/associates'.

While it is impossible it would be interesting to see how many people in the world actually want a Rolex to wear and keep as a watch not an investment.. I am pretty sure if these people where to be given the watch, the production would easily follow demand. However, given the speculative frenzy of a market (this counts crypto, stock, real estate, and luxury goods), we are seeing unnatural demands from people who are speculating. I mean who in their right mind want to pay more than 2.5x the retail price for a watch - this is what is happening right now, and it is completely crazy if you ask me. Everyone believing that this will continue need to remember that trees do not grow into the sky..

[PhilippeD]

Originally Posted by dpt.calvin

What’s the TLDR version?

[4rnold]

Yes that's true. You could say it's a bubble going to explode. But it's more likely that the Bitcoin bubble will explode than the Rolex market imho. Because a Rolex watch has more intrinsic value imho

Will it cool down, ik think so, will it burst? No

I think this, because: take this example:
Take for example a classic car from 1935. Go to 1000 random people and say can have this car for free. You will be astonished about the number of People who will refuse to have the car (because they Will be afraid of the high maintenance cost)
We allready see that (in general) the demand for these cars is diminishing.

Ok now do the same with a Rolex watch. No one will refuse. Because of obvious reasons. The maintenance cost is either lower or not known to them. It's easy to sell.
To me, it means that the demand for a Rolex watch will allways be high, just like gold,...

[RyanO]

Originally Posted by TheNguyener601

Rolex priced increase starting to reflect in the secondary market. The Batman is just climbing and climbing


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I’ve noticed this as well. Quite the jump last few weeks.


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[1665fan]

Originally Posted by TheNguyener601

Rolex priced increase starting to reflect in the secondary market. The Batman is just climbing and climbing


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Yes I’ve seen many over 20k and up…. Absolutely crazy

[1William]

Good read and well written. I see the issue as demand based on production numbers. I also think you can set aside a lot of the Swiss watches manufactured as the desirability is not there. So the true number of desirable watches is even lower than production numbers across the industry. I used to believe this was a bubble but I now believe it is like a balloon. It will expand and constrict based on many factors but will not burst unless catastrophic conditions occur world wide and then it would not matter. Too many people wanting too few watches results in what we are seeing.

[mattidk]

I think as long as the huge demands still around, no price increases will even help soften this situation. People starts to invest in Rolex instead of saving account or stock market, some may have earned well from crypto and like to move to watch asset - why not if this is wearable and physically touchable. Covid helps accerate this. I really hope RL comes up with something sustainable for end users and not for speculators that primary drive the main demands at this point.

[Oxfordian]

Rolex is the watch to get, I believe that for many buying a Rolex has become financially achievable in the last few years, cheap credit offers many the chance to own a watch from one of the most desirable brands on the planet.

In addition with many working from home over the last two years, not having commuting costs or taking expensive holidays due to the pandemic there has been a surplus of money in many homes so splashing a bit of cash on a luxury item appears a good idea, especially when that item has investment potential as it looks as though it can be sold in the future for more than what the buyer paid for it.

For some making a quick profit is all that matters so they are pushing to get a Rolex to sell on.

As others have said Rolex is a brand known by many millions of people around the world, celebrities along with the rich and famous (or not so famous) are seen on social media wearing watches from Rolex this only drives the desire to own a Rolex watch ever upwards.

I see no sight to the end of the Rolex desirability and demand bubble, I don't see Rolex changing anything, I don't expect to see an increase in production unless Rolex decides to take lines out of production to allow expansion in production of the more desirable lines and that may be an option, neither the Milgauss or the Air King received a movement upgrade in 2021 so is this Rolex's plan, I have no idea but its a thought that runs through my mind on a frequent basis.

It will be interesting to see how this pans out in the years to come.

[russ86]

Something to think about

[1665fan]

Rolex is the new crypto….. instead of getting imaginary coins you get a watch to wear….. what’s better than that?????

[inadeje]

Originally Posted by vh2k

Rolex is 25% of market VALUE — not units.

The Swiss watch industry easily produces over 10 million units per year.

Yes, technically speaking you are correct, however, I wanted to expose a real-world view to better project my theory, so I removed 6m of the 7m Swatch Group’s production, since I think we can all agree that swatch, while manufactured in Switzerland, don’t bring any meaningful comparisons to the overall outcome.

Originally Posted by Andad

Yes, a few interesting calculations.

Switzerland produced just over 14 million watches in 2020?

2019 was even higher.

Yes, but a cursory review of swiss watch production reveals that easily 7-10m are what we could call disposable watches (e.g. swatch), not really viable to include in this type of analysis unless we seek skewed data.

Originally Posted by 4rnold

Yes that's true. You could say it's a bubble going to explode. But it's more likely that the Bitcoin bubble will explode than the Rolex market imho. Because a Rolex watch has more intrinsic value imho

Will it cool down, ik think so, will it burst? No

I think this, because: take this example:
Take for example a classic car from 1935. Go to 1000 random people and say can have this car for free. You will be astonished about the number of People who will refuse to have the car (because they Will be afraid of the high maintenance cost)
We allready see that (in general) the demand for these cars is diminishing.

Ok now do the same with a Rolex watch. No one will refuse. Because of obvious reasons. The maintenance cost is either lower or not known to them. It's easy to sell.
To me, it means that the demand for a Rolex watch will allways be high, just like gold,...

Very good point. Yes, Rolex could be considered as a fairly stable (in terms of value/weight/size) asset class. 10 x Platinum Day Date would be 1m dollars, more or less. Those 1m dollars would occupy a smaller area in a safe than the 1m dollars in dollar bills. History also tells us that the Rolex value is likely to follow inflation and retain par value.

Originally Posted by 1William

I see the issue as demand based on production numbers. I also think you can set aside a lot of the Swiss watches manufactured as the desirability is not there. So the true number of desirable watches is even lower than production numbers across the industry. .

Yes, as I mentioned above, I took the liberty to exclude production numbers that don’t particularly make any sense to include (e.g. swatch) so as to condense the numbers down to like-for-like. Of course, this is just a rapid study and overview, not seeking to provide an accurate data driven factual result, rather just a quick analysis to obtain opinions.

Originally Posted by 1665fan

Rolex is the new crypto….. instead of getting imaginary coins you get a watch to wear….. what’s better than that?????

Exactly. Rolex is a venerable and somewhat unlikely asset class. There are more parallels with crypto than many wish to accept. Take for instance this example. Your job relocated you for a year, so you want to move say 100k USD from New York to London. As we all know, taking cash is a risk and must be declared. Taking a watch on your wrist is an easier proposition. The watch market is (currently) very liquid, hence the probability of turning the watch back into cash upon arrival in London is both very high and immediate. There aren’t many comparable asset classes with which one could do that.

[stevecv]

Great analysis, agreed entirely. What makes it worse is that Rolex will never get back the time or production they lost when they closed in 2020. They won't increase production which means they won't even be able to catch back up.

When you operate at or near 100% capacity, then you lose months of production, you have to work over 100% just to get back to where you were prior to the shutdown. We all know they won't do this, a recent press release addressed that exactly.

And as you point out, the brand has only because more popular and desirable which only makes matters worse. Raising the prices does not turn away buyers, why? The alternative Rolex on the grey market is far more expensive.